Emergent Research

EMERGENT RESEARCH is focused on better understanding the small business sector of the US and global economy.

Authors

The authors are Steve King and Carolyn Ockels. Steve and Carolyn are partners at Emergent Research and Senior Fellows at the Society for New Communications Research. Carolyn is leading the coworking study and Steve is a member of the project team.

Videos

Disclosure Policy

Emergent Research works with corporate, government and non-profit clients. When we reference organizations that have provided us funding in the last year we will note it.
If we mention a product or service that we received for free or other considerations, we will note it.

Assistant Edge

Globalization

May 26, 2008

For many years Brazil has jokingly been referred to as "a country that will always have great potential." But over the last decade, and in particular the last 3 years, Brazil has experienced strong economic growth. Key quote from a recent Wall Street Journal article:

"A recent study by the local office of the French research firm Ipsos found that since 2005 more than 20 million people had entered the middle class, defined here as families with monthly income of around $635. The percentage of middle-class Brazilians has grown to 46% from 34%.

The new middle class has propelled a doubling in the domestic market for cosmetics, home electrical appliances and computers since 2002, according to Euromonitor International. In the computer sector, middle-class buyers are accounting for about 40% of sales, according to market analysts. Brazil now ranks fourth globally in computer sales behind the U.S., China and Japan."

Brazil has always had enormous natural resources and has benefited from the run up in soybean, iron ore,timber and other commodity prices. While many remain skeptical and major problems like crime and corruption exist, the future looks increasingly bright for Brazil.

April 29, 2008

Foreign Policy magazine's article The Coming Euroinvasion is on the weak dollar leading to European firms aggressively buying U.S. companies. From the article:

""I am not worried about rich Arabs; it’s the French who worry me.” This was the response from a businessman in Clovis, California, reacting to my comment that the U.S. government was concerned about the influence of foreign-owned sovereign wealth funds."

The article goes on to talk about how the falling dollar has made the U.S. a much cheaper place to do business than Europe. From the article:

"For many companies, moving across the Atlantic is the fastest and cheapest way to cut costs and become more competitive. The average hourly manufacturing wage in Europe is 16 percent higher than in the United States. Social insurance and payroll taxes are far steeper in Europe. As are energy costs: the average price of a kilowatt-hour for industrial usage in Europe is roughly 60 percent more than in the United States. Transportation costs are higher, too. And the cost advantages of operating in the United States don’t stop there. Land is still far cheaper in the United States."

But the appeal of locating in the U.S is not limited to costs. Many foreign companies want a U.S. presence because of the large market and to access U.S. skills and talent. Quote from an Italian manufacturing firm choosing to set up in the U.S.:

"It will not only be cheaper, but it will also place me and my engineers in the middle of a large cluster of leading-edge technology companies and in the largest market in the world."

The shifts in cost structures, aided by the falling dollar, is making U.S. businesses much more cost competitive. In addition to leading to more U.S. exports and export opportunities, it is also resulting in more foreign direct investment in the U.S. It is also increasing small business globalization - both in terms of driving small U.S. companies export more and by increasing the number of small foreign firms that set up operations here.

April 09, 2008

USA Today has an in-depth look at the growth of small business exports. Key quote on the substantial rise in exports:

"From 1992 through 2007, exports by U.S. small businesses have soared nearly fourfold to $400 billion, according to a preliminary estimate by economist Harvey Bronstein of the U.S. Small Business Administration."

The article covers the major trends driving this increase and includes several small business export case studies. Also not to be missed is the list of tips for small business exporters from global trade expert Laurel Delaney, CEO of Globe Trade.

Related to this, the International Herald Tribune has an article on the inflationary pressures that are impacting the developing world, especially in Asia. From the article:

"First, developing countries now produce nearly half of all American imports. Second, inflation in these countries is coming at the same time that many of their currencies are rising against the dollar. That puts American consumers in a double bind, paying at least some of producers' higher costs for making their goods, and higher prices on top of that because the dollar buys less in those countries."

These inflationary pressures are not good for developing economies or the U.S. consumer. However, they make U.S. produced goods and services more competitive and help drive the growth of U.S. small business exports.

"...one of the most common mistakes businesses make is getting into a foreign market too quickly before working around all the rules and regulations...recommends that small businesses plan to set aside 5 percent of their expected revenue to pay for these costs."

While exporting has gotten a lot easier and cheaper over the last decade, it is not free. There are still rules, regulations and expenses associated with exporting. Small businesses need to be aware of these.

"The American system of higher education, long the envy of the world, is becoming an important export as more universities take their programs overseas."

"....internationalization has moved high on the agenda at most universities, to prepare students for a globalized world, and to help faculty members stay up-to-date in their disciplines."

Colleges and universities are recognizing that both they and they students live in a globalizing world. This means being global as an institution and providing their students a globally oriented education.

Our work points to more and more small businesses getting involved in global trade. One driver of this is education. As our colleges and universities become more global so will their students - and as these students enter the work force being global will be more natural than prior generations.

February 04, 2008

Emerging markets..."are growing so rapidly that within just two years they will account for half of the all the world's consumer spending, estimates Harish Manwani, head of the Asian and African businesses of Unilever, a giant of the world's consumer-goods industries."

January 30, 2008

Long piece (8 pages) called "Waving Goodby to Hegemony" in Sunday's NY Times. It is on the changing global geopolitical situation. The basic premise is the world is no longer dominated by the US and that there is now a geopolitical "Big Three." Key quote:

So now, rather than bestriding the globe, we (the US) are competing — and losing — in a geopolitical marketplace alongside the world’s other superpowers: the European Union and China. This is geopolitics in the 21st century: the new Big Three.

While the focus of the article is on geopolitics, the same forces are impacting global economics. The US share of global GNP continues to fall as other economies grow. This is leading to huge increases in global trade. One quote I really like from the article:

"Globalization apologizes to no one; we must stay on top of it or become its victim."

For US small businesses the growth of the rest of the world is creating many new export opportunities. Our next forecast report will cover this in more detail.

January 25, 2008

UCLA professor and noted author Jared Diamond (Guns, Germs and Steel and Collapse) has a great op-ed piece in the NY Times on consumption factors. Diamond defines consumption factors as the average rate people in various countries consumer resources. Key quote:

"The average rates at which people consume resources like oil and metals, and produce wastes like plastics and greenhouse gases, are about 32 times higher in North America, Western Europe, Japan and Australia than they are in the developing world."

Diamond explains that the developing world is on a path to greatly increase their consumption rates due to economic growth. He points out this potentially a huge problem - the world simply can't support 6-9 billion people consuming at the rate people in developed countries (and especially Americans) do.

Diamond suggests that the only solution is meeting in the middle with developed countries reducing their consumption rates. He points out this can be done without negatively impacting living standards in developed countries if we move to more sustainable environmental practices.

While the point of the piece was to highlight the need to cut consumption in the developed world, I was also struck by the numbers and what they mean for global trade. Diamond points out that most developing countries are working to increase their rates of consumption. He says:

"People who consume little want to enjoy the high-consumption lifestyle. Governments of developing countries make an increase in living standards a primary goal of national policy."

Rising consumption factors in the developing means increased global trade. There simply is no way for these countries to grow domestic consumption without cross border trade. China is an a good example. Their rapid economic growth has in large been part driven by cross border trade and has resulted in much higher consumption rates.

The next decade will see dramatic increases in global trade driven by the growth of developing countries. This will also lead to a wide range of new opportunities for US small businesses to participate in cross border trade. Hopefully much of this trade will be done with sustainability in mind.

January 22, 2008

The NY Times as an article called "Overseas Investors Buy Aggresively in US". The article discusses how the lower dollar has made US assets attractively priced for foreign buyers. It also makes investment in the US cheaper, and US production and manufacturing costs cheaper. Key quote on German steel company ThyssenKrupp's recently breaking ground on a $3.7 billion steel plant in Alabama:

"(ThyssenKrupp) executives spoke effusively about the low cost of production in the United States and the chance to reach many millions of customers — particularly because of the North American Free Trade Agreement, which allows goods to flow into Mexico and Canada free of duty."

The cheap dollar is accelerating a long term trend towards increased US cross border trade. While the impacts on large corporations gets most of the press, the falling dollar is also increasing small business cross border trade as small exporters take advantage of the weak dollar.

January 10, 2008

We often look to small business trade expert Laurel Delaney for insight and information on small business globalization. Her Global Small Business Blog has a great post with lots of resources and lists related to small business exports.